International Shipholding (ISH)

Foreign Flag. We operate a foreign flag LASH vessel, a Dockship that positions barges for pick-up and discharge, and a fleet of LASH barges on a scheduled transatlantic liner service under the name Forest Lines. Our LASH vessel normally makes 10 round trip sailings per year between U.S. Gulf ports and ports in northern Europe. We have diversified our eastbound cargo among various commercial shippers, and during 2006 we carried significant quantities of rice, petroleum coke, other bulk products, and other general cargo.

Over the years, we have established a base of commercial shippers to which we provide space on the westbound Forest Lines service. The principal westbound cargoes are steel and other metal products, and other general cargo. Over the last five years, the westbound utilization rate for these vessels averaged approximately 89.9% per year.

U.S. Flag. We own a U.S. flag LASH vessel operating in a liner service between the U.S. Gulf and East Coast ports and ports in the Red Sea and Middle East.

The Maritime Security Act of 1996, which established the Maritime Security Program (MSP), was signed into law in October of 1996 and has been extended to 2015. Under the MSP, each participating vessel is eligible to receive an annual payment of $2.6 million in years 2007 and 2008, $2.9 million in years 2009 to 2011, and $3.1 million in years 2012 to 2015, which are subject to annual appropriations and not guaranteed. During the MSPs fiscal year 2006 (October 1, 2005  September 30, 2006), the appropriation was $2.575 million per eligible vessel. As of December 31, 2006, our U.S. flag LASH vessel mentioned earlier, five PCTCs and two Container ships included in the Time Charter Contracts segment were qualified for participation.

Foreign Flag. We operate two foreign flag LASH vessels and a self-propelled, semi-submersible feeder vessel on a scheduled transatlantic liner service under the name Forest Lines. One of the two foreign flag LASH vessels is under an operating lease through 2007 with options to extend thereafter. Each Forest Lines LASH vessel normally makes 10 round trip sailings per year between U.S. Gulf ports and ports in northern Europe. We have diversified our eastbound cargo among various commercial shippers and carry significant quantities of rice and petroleum coke as well as paper products.

Over the years, we have established a base of commercial shippers to which we provide space on the westbound Forest Lines service. The principal westbound cargoes are steel and other metal products, high-grade paper and wood products, and other general cargo. Over the last five years, the westbound utilization rate for these vessels averaged approximately 88.7% per year.

U.S. Flag. We own a U.S. flag LASH vessel operating in a liner service between the U.S. Gulf and East Coast ports and ports in the Red Sea and Middle East.

The Maritime Security Act of 1996 (MSA), which provides for a program for certain U.S. flag vessels, was signed into law in October of 1996. Under this program, the Maritime Security Program (MSP), each participating vessel was eligible to receive an annual payment of $2.1 million, which is subject to annual appropriations and not guaranteed. In 2003, Congress authorized an extension of the MSP through 2015, increased the number of ships industry-wide eligible to participate in the program from 47 to 60, and increased the annual payment per vessel, all effective on October 1, 2005. Annual payments for each vessel in the new program will be $2.6 million in years 2006 to 2008, $2.9 million in years 2009 to 2011, and $3.1 million in years 2012 to 2015. As of December 31, 2005, our U.S. flag LASH vessel mentioned earlier, five PCTCs and two Container ships included in the Time Charter Contracts segment have qualified for participation.

As of December 31, 2005, the U.S. Congress had not yet enacted the legislation to appropriate funding for this program for fiscal year 2006 at $2.6 million per year per vessel. Therefore, Congress passed a continuing resolution allowing this program to continue at fiscal year 2005 funding levels for all vessels qualifying for the program. Since the number of vessels in this program increased October 1, 2005, which was the beginning of the new fiscal year, and the total funds appropriated for fiscal year 2006 are higher than for fiscal year 2005, the payments per vessel were lower for the period until the legislation was passed in January of 2006 and the funds were appropriated for fiscal year 2006. In January of 2006, payments were received that resulted in fully compensating us for all periods since October 1, 2005, based on $2.6 million per vessel per year.